Wed Sep 13 01:00:00 EAT 2017

DRC loses Shs4.6 trillion each year in unpaid taxes

The DRC tops the list of African countries whose resources are being plundered. AFP GRAPHIC

By James Anyanzwa

In Summary

The Democratic Republic of Congo tops the list of African countries whose resources are being plundered. James Anyanzwa finds out how corruption and mismanagement of revenue agencies and Gécamines are leaching more than a fifth of proceeds from the national budget.

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The Democratic Republic of Congo is losing up to $1.3 billion (Shs4.6 trillion) in revenue each year due to failure by public bodies, tax agencies and the state mining firm Gécamines to remit levies and the pillage of revenue in suspicious deals. The DRC tops the list of African countries whose resources are being plundered.

Zimbabwe, Mauritania, Nigeria, Equatorial Guinea, Sudan and Eritrea have also featured in the complex corruption web in the production and sale of commercial crude oil, natural gas and minerals amounting to trillions of dollars in revenue.Investigations by London-based lobby Global Witness have found more than $750 million (Shs2.6 trillion) of DRC’s revenue earned from mining went missing between 2013 and 2015, as the Kinshasa administration struggled with providing public services to the people.

Corruption, mismanagementGlobal Witness said the state-owned mining company and tax agencies held back from the Congolese national Treasury $149 million (Shs536b) in 2013, $314 million (Shs1.t trillion) in 2014 and $291 (Shs1 trillion) million in 2015.Corruption and mismanagement of revenue agencies and Gécamines are leaching over a fifth of proceeds from the national budget as President Joseph Kabila clings to power at a time of political unrest, Global Witness notes.

DRC’s minerals such as gold and cobalt attract huge investments from foreign firms due to low production costs. The country is Africa’s biggest copper producer. It also produces 60 per cent of the world’s cobalt.

Global Witness senior campaigner Pete Jones said in report titled ‘Regime Cash Machine’ that much more of the money from the mining sector needs to reach the Treasury to improve DRC’s public spending priorities including education, health, transport and infrastructure.DRC is wracked by political violence and unrest. A key cause of discontent with President Kabila’s regime is the chronic lack of funding of basic services such as schools, hospitals and roads.

Mr Jones said an analysis of Extractive Industries Transparency Initiative latest data points to the need for transparency and accountability from the mining sector to tax agencies if the DRC is to avoid sliding into conflict and chaos.“Mining revenues should be helping to lift people out of poverty. Instead huge sums are siphoned away from public coffers into unaccountable agencies headed by people with ties to the political elite,” he said.

Gécamines financial dealings are a mystery as it does not publish any audited accounts, income, expenditure, debt repayments or whether any profit is paid to the state as the sole shareholder.“Gécamines is practically a black hole. A black hole where you do not know who is doing what, where the money goes, which deal is underway, under what conditions and so on,” said civil society activist Cyrille Kabamba.

Poor countriesDRC is one of Africa’s biggest countries and also among the poorest. It is ranked 176 out of 188 countries in United Nations Human Development Report with 77 per cent of the population surviving on less than $2 daily.

“Up to $10 billion worth of copper and cobalt is extracted and exported from every year, yet only 6 per cent of this revenue is reaching the national budget,” said Regime Cash Machine report of Global Witness.

Foreign mining firms annually pay over $1 billion (Shs3.5 trillion) among others as taxes and royalties in DRC. An obscure law allows agencies to keep part of fines levied leading to fabricated fines in an effort to increase funds that are kept.State owned mining firms with Gécamines as most important ought to use licences, assets and participate in joint ventures to make money for DRC.

Tax agencies annually fail to remit revenues of over $50 million to treasury.Global Witness Campaign Leader Nat Dyer said DRC’s law allows tax agencies to hold back portion of mining revenues for own use and opacity around withheld funds makes the system highly susceptible to corruption.

“The tax agencies are also permitted to issue penalties to mining companies for tax violations and keep a proportion which can be enormous amounts. This encourages “predatory behaviour” and corruption,” he said.DRC’s constitution states every Congolese person has the right to enjoy benefits of the country’s national wealth, and the state has a duty to redistribute wealth equitably and guarantee the right to development.